This blog is dedicated to publishing logical, rational arguements in the favor of American classical liberalism. If you want, you can read my other blogs, with my literature, or on the debate between evolution and Creationism.
~K. T. Stone

Saturday, January 17, 2009

Obama: Taxation Without Forethought (Part One)

Everyone's heard the campaign rhetoric- Obama will raise taxes only on the rich, that he will cut taxes for 95% of Americans. Couple of points on this.

First off, it is impossible to cut the taxes of 95% of Americans. According to the IRS, 35% of Americans pay no federal income taxes to begin with, with the top 2% of earners already paying 40% of the load. A phrase often used on Obama's campaign trail was "tax relief"- most certainly not the same thing as a tax cut. A "tax cut" is the action of lowering taxes. "Tax relief" is a Democrat's euphemism for expanding welfare. If we needed another obvious indication of Obama's intent to "spread the wealth" in a socialistic manner (besides his direct quote "I intend to spread the wealth around" in the now-famed "Joe the Plumber" incident), that would be the best candidate. How this expanded welfare is going to be paid for; with the government already toeing the line for a $1.2 trillion dollar deficit this year, is rather ambiguous. Merely raising the taxes on the already unfairly-taxes 2% would most certainly not cover this, so it is impossible to believe he will not raise taxes on the same middle-class worker he swore to serve.

Even assuming he managed to keep this promise (anyone remember the "Read my lips" line from Bush(41)?), his massive spending plan would surely eat up even more of our tax dollars. Though he has included what he calls "tax cuts" in the new update to his bailout package ($350 billion of it) in order to entice Republicans to support it, we conservatives must look beyond just the phrase "tax cut" to see what it entails. He basically wants to give a $500 tax rebate to every American, and typically I have no issue with the government giving us our money back.

However, there are two main flaws with this. One can be shown by looking at the 2008 "stimulus package" in which Bush gave a $600 tax rebate to Americans. The idea was to put money in consumer pockets, so they'd have more to spend and thus boost the economy from the demand-side of things. However, research shows that only 6% of it was used to buy new things- everyone else either saved it or used it to pay off debts. Consumers look ahead- only a permanent, fixed tax cut would give them the confidence to start buying more. This check would go the exact same way as the last, doing nothing to stimulate the economy and being a complete waste of taxpayer dollars.

The second, glaring issue with this is he wants to give this tax rebate to ALL Americans- including the ones who don't pay taxes already. Taxpayers would actually be losing money on this proposal, as their hard-earned dollars they are promised back would go to those who don't pay any taxes whatsoever. And again, the rebates would not inspire any consumer confidence, merely be used to pay off debt and saved.

If Democrats insist on focusing on the demand-side of economic stimulus, they might as well try something that works: cutting taxes across the board. Reagen did it, worked wonders.

A better policy would be to look at the "low end" of economics by looking at employment. Again, conservatives have mostly lost the message that Reagen clarified: lowering business taxes an regulation helps the little guy as well as the "big guy". In free markets, when one fails; the other typically does as well (today is a good example of that, as well as the great depression and any other free-market recession in the past hundred years).

A common argument today is that the current failure is due to the "deregulation" of the markets. Au contraire! Allow me to quote at length Walter E. Williams:

"The Federal Register, which lists new regulations, annually averaged 72,844 pages between 1977 and 1980. During the Reagan years, the average fell to 54,335. During the Bush I years, they rose to 59,527, to 71,590 during the Clinton years and rose to a record of 75,526 during the Bush II years. Employees in government regulatory agencies grew from 146,139 in 1980 to 238,351 in 2007, a 63 percent increase. In the banking and finance industries, regulatory spending between 1980 and 2007 almost tripled, rising from $725 million to $2.07 billion. So here's my question: What are we to make of congressmen, talking heads and news media people who tell us the financial meltdown is a result of deregulation and free markets? Are they ignorant, stupid or venal? "

As has been proven time again through history, and is applicable today; is the rule of thumb that more regulation and more taxes means more cost to doing business. You increase the cost of doing business, companies have less money to hire new people or pay more to their employees, thus hurting the little guy at least as much as said company, if not more.

Inasmuch as this has dragged on more than I'd expected, I'll give outline the rest of the issues with Obama's proposed tax policies at a later date.